Stocks a and B Each Have an Expected Return of 15%,a

question 95

Multiple Choice

Stocks A and B each have an expected return of 15%,a standard deviation of 20%,and a beta of 1.2.The returns on the two stocks have a correlation coefficient of +0.6.You have a portfolio that consists of 50% A and 50% B.Which of the following statements is CORRECT?

• A) The portfolio's beta is less than 1.2.
• B) The portfolio's expected return is 15%.
• C) The portfolio's standard deviation is greater than 20%.
• D) The portfolio's beta is greater than 1.2.
• E) The portfolio's standard deviation is 20%.

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Definitions:

Causally Related

Refers to entities or events that have a cause-and-effect correlation with one another.

Causality

The relation between causes and effects, often considered fundamental to the understanding and analysis of phenomena in various fields, including philosophy and science.

Conclusion

The final part of something, typically a process, argument, or story, or the judgment or decision reached by reasoning.

False Alternative

A logical fallacy that occurs when an argument unjustly limits the options to two when there are more possibilities.